BMW Stakes Its Claim on the Lower-End Electric Car Market

Even in its production-ready form, the styling of the new BMW i3 electric car took many back by surprise, as the small vehicle looked so radically different from nearly everything else in BMW’s rather extensive lineup. Aside from the trademark kidney grill and badge, there’s little indication that the i3 is at all related to the German brand, at least until you get to the car’s base price of $41,350.

As polarizing as the new look seems to be, and as steep as the base cost for a small compact is, the i3 has two very powerful factors working in its favor: it isa BMW, and it is an electric car. Combined, those two things alone should generate sufficient demand for the car.

Indeed, the formula has worked. So well, actually, that BMW is now exploring the possibility of increasing its electric car capacity just to accommodate the early demand for the vehicle. BMW has reportedly received some 8,000 reservations for the car, and that’s even before the i3 hits European showrooms next month, Chief Financial Officer Friedrich Eichiner said on Monday.

“If demand holds, which is what it’s looking like, we will soon have to invest more,” Eichiner explained at a press conference in Amsterdam. BMW expects to sell more than 10,000 of the i3 next year, and “will adjust capacity according to demand.”

Further, BMW is going to great lengths to address the key issue with electric cars: their limited range and more limited infrastructure. The Detroit News reports that BMW is simultaneously offering the use of an SUV with the electric car’s purchase; customers who buy the i3 have the option to purchase a feature that will enable them to book a conventional auto like the full-size X5 SUV for several weeks per year as a backup, the publication explained.

That’s a comforting feature to have, but a critical factor for an electric car is to help alleviate the reliance on gasoline. As electric vehicles become more popular, the supporting infrastructure and charging networks will become more justifiable investments.

This is already a well-known fact for Fresno, California-based Tesla Motors (NASDAQ:TSLA), which has been single-handedly building its own network across the U.S. and in parts of Europe. Tesla has done its fair share of shaking up the auto industry — and it doesn’t appear to be done, either — and like the BMW, its Model S sedan operates in a cozy, cushy space of its own.

The i3 appears to be an attempt by BMW to compete in the “lower-end” luxury EV market from the bottom; because Tesla has already carved a niche out in the higher end, BMW is aiming to pick up the slack on the other side.

As BMW’s reservation numbers have indicated, there is certainly demand for a small luxury EV priced in the $40,000-$50,000 frame. This is a crucial development for Tesla, which is counting on its Gen III model (slated for $35,000-$40,000, roughly) to really bring the company up to speed with larger car manufacturers and away from its low-volume boutique roots.

More impressively, neither company has fully taken advantage of the market opportunities in Europe or China for electric cars, meaning the U.S. has been the primary gauge for measuring the market’s temperature on electric vehicles. Once these manufacturers can bring their margins to comparable levels, electric vehicles may soon become a far more profitable enterprise.